-In the above figure, if the economy initially is at point A and government expenditure increases, in the short run the economy will move to point
A) B.
B) C.
C) A, that is, the equilibrium will not change.
D) None of the above answers is correct.

Question

-In the above figure, if the economy initially is at point A and government expenditure increases, in the short run the economy will move to point
A) B. 
B) C. 
C) A, that is, the equilibrium will not change. 
D) None of the above answers is correct.

Quizplus · Accepted Answer

An increase in government expenditure in the short run typically leads to an increase in aggregate demand. This would shift the aggregate demand curve to the right, moving the economy from point A to a higher level of output and price, which is represented by point B in a standard aggregate demand and supply model.

-In the Above Figure, If the Economy Initially Is at Point